Do you want to keep adding to your nest egg? Apply this philosophy in your investment portfolio! [Wednesdays: The Independent Investor]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
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We hope you’re having a great day so far.
In this article, we’ll talk about a coaching comment that’s applicable to your personal life, career, and investing approach. Our hope is that this lesson will make you strategically think about your life choices and financial decision-making.
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The Independent Investor
“Without continual growth and progress, such words as improvement, achievement, and success have no meaning.”
– Benjamin Franklin, one of the Founding Fathers of the United States
“To improve is to change; to be perfect is to change often.”
– Winston Churchill, former U.K. Prime Minister
“Excellent firms don’t believe in excellence—only in constant improvement and constant change.”
– Tom Peters, a bestselling author on business management practices
What do you notice from the quotes above?
Aside from being said by some of the world’s greatest and most influential leaders and professionals, the quotes highlight 2 things: Change and improvement.
There’s Always Room for Improvement
In November 2022, Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, delivered a coaching comment to his workforce about America’s economy after World War II (WWII).
He said as one of the economies that wasn’t badly damaged by the war, the U.S. was able to sell its goods without much pushback. It didn’t even matter whether or not the goods were of high quality; competition had been almost wiped out.
Eventually, management consultant W. Edwards Deming recognized that such a setup wouldn’t continue for a long time. He believed if the U.S. manufacturing industry kept skating by, it would someday fall behind.
Because of that, Deming tried to convince companies that they needed to constantly improve. The challenge?
Only a few listened to him. So, he sought out a more receptive group…
The Rise of “Kaizen”
Deming turned to the island nation of Japan at a time when the Allies—Great Britain, the U.S., and the Soviet Union—were helping the Asian nation recover from the impacts of WWII. He consulted for Japanese companies and his efforts led to the post-war Japanese manufacturing boom.
Deming taught 14 principles of management to Japanese executives. His crucial first point?
he concept of continuous improvement, known as “kaizen” in Japanese.
The Asian nation took this concept seriously—meaning, EVERYONE kept working to analyze and improve their businesses… and one of the best examples of “kaizen” in action came from automotive manufacturer Toyota Motor Corporation.
Photo from IronFX
In a past “Return Driven Strategy” article, we talked about how Toyota has become one of the world’s greatest companies.
Having an unorthodox manufacturing system enables the Japanese company to make some of the world’s best automobiles at an affordable price, and develop and enhance new products quickly.
Whenever it thought it could design something better, it would go through a process called “kaizen blitz” to come up with the best solution. Here, Toyota’s team would get together and brainstorm to improve a specific process or product.
The team showed admirable commitment to their work too! They’d keep working until they came up with the best improvement strategy.
Until today, “kaizen” reigns supreme in Japan. In fact, one of the highest honors in the Japanese business industry is the “Deming Prize,” in recognition of the American consultant’s effective management concepts.
“Kaizen” is Applicable to Investing Too
The concept of continuous improvement is not just for big corporations. It is useful for smaller companies and for your investment portfolio too!
According to Professor Litman, there’s always room for improvement in investing. After all, picking stocks for your portfolio is never linear or just a one-time decision.
As the market changes and you learn more about investing, your philosophy should change too. Besides, great investors aren’t just good at one investing approach. They also know what is and how to use the RIGHT tool for the RIGHT job.
Professor Litman and his team at Altimetry Financial Research also practice “kaizen.” Regular clients know the basis of everything the team does starts with Uniform Accounting and deep company analysis.
This practice has led to the team’s impressive performances, like the Microcap Confidential advisory that has doubled the benchmark Russell 2000 Index since its first issue in 2020.
However, Professor Litman believes even a project as successful as that can still be improved. One of the ways to do that?
By not just focusing on the successes but also on the failures… and ways to eliminate them.
Professor Litman’s workforce at Valens Research also practices the concept of continuous improvement. The company has a “kaizen” comment box where employees can voice out any concern they might have. Aside from their concerns, they also include a suggestion on what they think the fix should be.
See how useful and helpful “kaizen” is in your personal life, career, and investing approach?
As an investor, there are plenty of tools at your disposal. That’s why you shouldn’t simply rely on your existing investment laurels.
Sure, your usual strategy might have proven successful over the past years. However, that still doesn’t guarantee that doing the same thing repeatedly will always work.
Like other investors and successful businesses, you should practice continuous improvement in your investment processes. Be open to new tools and strategies that you can add to your arsenal!
Oh, and one more thing: Don’t beat yourself up for every loss you experience or get overconfident every time you win. Instead, keep asking yourself what went wrong or right in your approach.
After all, the market is dynamic. If you want to keep adding to your nest egg, you have to be dynamic and adapt to changes CONTINUOUSLY too.
We hope you find today’s article insightful and interesting!
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
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